Pallet Enterprise discusses the upcoming elections with a number of experts to try to identify what we can expect after the polls close.

By Chaille Brindley Date Posted: 10/1/2012

As Tuesday November 6th approaches, it gets harder and harder to ignore the fact that Election Day is almost upon us. While you may be tired of the relentless attack ads, it is important to be educated about the various positions, voting records and differences between the candidates in both federal and local elections.

Voting is both the right and responsibility of every citizen. Pallet Enterprise has put together a comprehensive voting guide for the presidential election. I have also discussed the upcoming elections with a number of experts to try to identify what we can expect after the polls close. What will the regulatory environment look like after the elections? How will the various parties deal with the major issues of importance to the forest products industry and small businesses?

More Rules on the Way

All of the experts seemed to suggest that no matter who wins the presidential election, you will see more regulations coming out of Washington after the elections. Donna Harman, president and chief executive officer of the American Forest & Paper Association (AF&PA) said, “If it’s an outgoing Obama administration they are going to try to push the things out the door that they have been working on that they have in the pipeline. If it is a new Romney administration, they are going to try to put the brakes on the things that went out the door on the last guy’s watch.” She added that if Obama wins re-election, his second term would pick up priorities that had to get set aside for the healthcare and financial reforms, such as environmental issues.

Dan Bosch, manager of regulatory policy at the National Federation of Independent Businesses (NFIB), said, “Right now, we have seen the pace of regulations slow down a lot. And that is because the current administration has taken a lot of heat for the amount of regulations it was putting out. Many of the regulations that we thought a few years ago would have been put out by now have been held up. They are sitting there, potentially waiting to come out after the election.”

The Kiplinger Letter recently reported that there are more than 50 new rules in the final review process. And there are many more that could come out once the backlog of regulations is unleashed.

The congressional elections will also impact the next presidential administration no matter who wins. Grace Terpstra, a lobbyist for the U.S. lumber and forest products industries, said, “If Obama stays in office, then you have the House if it stays Republican will be fighting hard to hold back Obama’s second term initiative, which will focus on energy and the environment.”

Current trends suggest that the Republicans are likely to retain control of the House of Representatives although its majority might shrink a bit. The Democrats will likely hold a slight advantage in the Senate. And the White House race is too close to call although President Obama has a slight lead in most major polls. Of course, the only number that really counts is the final tally after the polls close.

How might the regulatory environment change in Washington? Bosch said, “If ultimately Romney took over next January, then he has pledged to reduce the amount of regulations coming out, and to regulate smarter...Romney has singled out the EPA as the agency that needs to be dialed back from its agenda. I would anticipate more reliance on a cost benefit analysis under a Romney administration.”

Terpstra suggested a different picture under a second Obama administration. She said, “If Obama does get re-elected, you will likely see some things that were shelved come back to life, and those regulations will be moved back closer in line with his core constituencies.” Over his years in office President Obama has supported more liberal leaning groups, such as labor unions, environmental organizations, etc.

If you look at the pace of regulations under the Obama administration, he

has actually passed fewer total regulations than the previous administration. However, the number of major regulations, those with an economic cost

over $100 million, has increased

significantly under President Obama. This includes EPA greenhouse gas regulations, air toxicity standards, healthcare reform and the Dodd-Frank financial reforms.

Given the recent gridlock in Washington, lawmakers and the next administration have a lot to do because a number of major issues are waiting to be resolved. This includes especially federal budgetary and tax policy.

Terpstra said, “All bets are that Congress will come in during the lame duck session and pass a continuing resolution to avoid the fiscal cliff, sort of punt the problem into the next congressional session.”

Regulatory Agenda – Environmental and Budgetary Measures

If the pace of regulations can be expected to increase, figuring out what will be hot topics is not easy. But there are some issues that will likely rise to the surface. This includes budgetary and tax policy concerns, resolving disputes over EPA standards, finalizing new OSHA rules and launching new renewable energy initiatives.

One area of concern for small businesses and the manufacturing sector is proposed training and prevention standards in development by OSHA. Called the Injury and Illness Prevention Programs (I2P2) rule, it would require all businesses in general to have a formal injury and illness prevention plan. Bosch said, “The concern is that employers would have the responsibility to keep employees from being injured from anything that OSHA considers a ‘foreseeable.’ And it is unclear what ‘foreseeable’ means.”

He added, “OSHA could potentially come in after the fact and regardless of how fluke an injury was and say, ‘Well you should have realized this was a possibility for some reason.’ It gives OSHA a blank slate in terms of what it can fine you for.”

A Romney administration might scale back the rule or eliminate it altogether. A second Obama administration is likely to continue forward with it although the final language or fate of the rule is far from certain.

The number one objective is to boost the economy because whichever party wins in November knows it will have a short ride in power if people don’t get back to work. Anything that is seen as hurting jobs could get shelved or dialed back.

Harman cautioned, “Economic growth is the only way that the unemployment numbers are really going to come down. Looking at the tax and the regulatory policies at the end of the day that is going to determine whether we have another four years of a stagnant economy or we have policies that promote and provide for a more robust economic future for our country. The bottom line is that is what is at stake in this election.”

One of the good news is that small businesses are popular right now in the political landscape. Terpstra said, “Small businesses are still popular. Everybody wants to claim small business and that they have tried to save small businesses. And there is a huge awareness that small business is the quintessential American dream.”

Democrats spoke about small business at their convention. Karen Mills, the head of the Small Business Administration, said, “President Obama cut small business taxes – not once or twice, but 18 times. He put record volume of guaranteed loans in the hands of America’s small businesses. He eliminated pages of burdensome forms and regulations so that small business owners can focus on profits instead of paperwork.”

Republicans counter that the Affordable Healthcare Act, new EPA rules and other Obama era regulations have offset any advances that small businesses made because of the previously mentioned reforms.

A major tax policy issue that is important to the many family-owned businesses in the forest products industry is the future of the estate tax. A lot depends on who is controlling Congress because the next administration can only do so much. Romney has pledged to try to repeal the estate tax while Obama wants to return the estate tax exemption and rates to 2009 levels, which would return the top tax rate on estates to 45% and reinstate the $7 million per-couple estate tax exemption. Obama stated that would “exempt all but the wealthiest three in 1,000 decedents from tax.”

Terpstra explain the difficulty budget situation currently holding up reforms. She said, “Romney can’t do away with the estate tax by himself. It’s a tough issue to get through Congress. It has a huge price tag. “

And all of that comes as the federal government faces a fiscal cliff of mandated spending cuts, many of which are actually just reductions in future increases. Beyond spending reductions, tax increases will take place as Bush era cuts are rolled back unless Congress acts before the end of the year.

Other issues of importance to the forest products and wood packaging industries include the Boiler MACT regulations, forest roads classified as point source contaminant under the Clean Water Act, greenhouse gas emission rules, carbon neutrality of wood products in green building standards, Biomass Crop Assistance Program funding and a wide variety of energy initiatives.

There are other major social issues where the government may be able to find some common ground, such as immigration reform. Moderates on both sides of the aisle may be able to forge a compromise bill, but the current political environment has kept any such major initiative from happening before the 2012 election.

Some of the campaign promises will be difficult to achieve even if a major shakeup occurs in Washington. Terpstra pointed to Romney’s pledge to try to repeal the Affordable Care Act, otherwise known as Obamacare. She said, “If Romney is elected, taking down the Affordable Care Act cannot be done on day one of a Romney administration.” She said that he will have to work with Congress to change the law although he could slow down its implementation using executive orders.

One of the issues being debated is the need to rollback regulations although Terpstra suggested that the industry supports some efforts. She pointed to the Lacey Act changes that provided protection for American companies that had to compete against illegally sourced wood from other countries.

Terpstra said, “We don’t fight regulations. We don’t live in anarchy. We fight over regulation and unnecessary regulation.”

Harman of AF&PA pointed to the regulatory process that needed to be changed more than anything. She said, “Our regulatory system is completely flawed and broken. As a country, we are regulating our businesses to death.”

The fact is that neither political party is going to be able to pass regulatory reform in isolation. Harman explained that regulations are held up for years due to court challenges by judges and special interest groups that are not elected by anybody to represent the will of the people. This causes a lot of uncertainty and makes it difficult for businesses to plan or grow. She said that Congress needs to “Put restrictions on the lawsuit lottery around some of the regulations.”

Harman mentioned the Boiler MACT rules intended to curb emissions of hazardous air pollutants from industrial boilers and process heaters. The first regulation was announced in 2004 during the Bush administration and was overturned by a federal court in 2007. The Obama administration spent the last four years trying to develop another version. Harman said, “The fact that the first Boiler MACT rule was supposed to be done in 2000; here we are in 2012, and we are on our second iteration and might even see a third version. Businesses just can’t plan – nobody can plan in that kind of uncertainty.”

Strange Alliances – Making Friends No Matter Who Wins

While many people think that Republicans are more likely to side with the forest products industry on issues, this may not always be the case. Lawmakers from both sides of the aisle have been valuable allies on issues such as the Lacey Act, EPA regulations, OSHA enforcement standards, classification of wood as a carbon neutral building product for green building standards and other key concerns.

When it comes to green building standards, renewable energy programs, the Lacey Act and other ecological issues, some conservative Republicans are less likely to support the regulations that have been backed by the forest products industry. Those lawmakers may oppose government interference of free markets or offer subsidies for green energy projects, even if it involves wood biomass. Some Democrats may be the most likely allies in these concerns for industry interests.

Harman said, “For us it is really important to have members of the House and Senate on both sides of the aisle that can articulate the concerns and understand the issues that the industry faces. We need lawmakers who can help come up with win-win solutions on policy matters that make sense for the country and our industry.”

One of the big issues to consider when evaluating candidates is the things they value when deciding on major new legislation. Harman said, “The outcome of the presidential race will set the overtone and policy agenda for the next four years.”

Harman added, “One of the frustrations that we have had with some environmental regulations is that either the current administration can’t or decides not to take the economic impact into account when it has the opportunity to do so.”